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This is what's lurking under the quiet market

A trader works on the floor of the New York Stock Exchange.
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A trader works on the floor of the New York Stock Exchange.

Even though markets are trading in a narrow range, traders are fixated on a potentially important level in the S&P 500.

"The major indices — SPX, OEX, INDU, RTY — are testing their 50-day moving averages, which sometimes act as support, so today's action will be telling," BTIG Chief Technical Strategist Katie Stockton said in a morning note Friday.

U.S. stocks traded narrowly mixed Friday morning, wrapping up a volatile week that saw the Dow's worst day since February and its best day since March. While disappointing retailer earnings renewed concerns about U.S. economic growth, traders said the existence of many crosscurrents in the market puts greater focus on technical levels.

The S&P 500 briefly dipped below its 50-day moving average in intraday trade Thursday but did not close below that level. The index was hovering just above its 50-day of 2,055.01 in morning trade Friday.

Lance Roberts, chief investment strategist at Clarity Financial, said if the S&P 500 falls below its 50-day moving average it will test the 200-day moving average around 2,012 and, if it falls below that, the index will test the lows of last year.


The Dow Jones industrial average also briefly fell below its 50-day moving average Thursday without closing below, and was just above that level of 17,643.03 in Friday morning trade.

The Nasdaq composite has underperformed the two other indexes and has been trading below its 50-day moving average since April 29.The current 50-day moving average is 4,815.84.

The small-cap Russell 2000 index, closely watched as in indicator on broader market direction, was trading just around its 50-day moving average of 1,109.16 Friday morning. The index dipped below in intraday trade Thursday but closed just above that average.

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"Weakness in European equity markets has led to deterioration in our short-term indicators, which no longer support the oversold bounce there," Stockton said in the note. "A weak close in the U.S. today would likely have the same effect, leading to downturns in the stochastics in a bearish short-term development."

CNBC's Gina Francolla contributed to this report.